Reconciliation Bill Tosses New York a Fiscal Hand Grenade

The pending health care legislation would cover the uninsured mainly by dumping most of them into the federal/state Medicaid program. Not surprisingly, many states have objected to the additional costs that such a Medicaid expansion would impose on their taxpayers. Indeed, that was the motivation behind the infamous “Cornhusker Kickback” in the Senate bill, under which the Federal government would pick up all of Nebraska’s Medicaid expansion costs in perpetuity.

In response to complaints from governors and state lawmakers, coupled with public outrage over the “Cornhusker Kickback,” section 1201 of Speaker Pelosi’s reconciliation bill amends the Senate bill to have the federal government cover all of the extra Medicaid benefit costs for all states in the first three years (2014-2016) with the federal share then declining so that from 2020 onward the Federal government would pay 90 percent of the costs with state taxpayers covering the remaining 10 percent.

New York Governor David Paterson, for one, has pronounced himself pleased with Speaker Pelosi’s solution and Democrats in New York’s congressional delegation are patting themselves on the back for securing this promised “improvement” to the Senate bill.

However, New York’s taxpayers and state legislators — as well as those in a some other states, most notably California — might be interested to learn that the Speaker’s bill also tosses them a Medicaid fiscal hand grenade with a five-year fuse attached.

Specifically, section 1202 of the reconciliation bill requires state Medicaid programs to pay primary care doctors rates for Medicaid patients that are equal to Medicare rates for two years in 2013 and 2014. This mandated physician pay hike would apply to services provided to all Medicaid patients, not just the “expansion population.” The federal government would also pick up 100 percent of the extra costs for this provision as well.

So what is the problem? Well, for a lot of states section 1202 will not be a problem, but for some — especially New York — it triggers a countdown to a state budget fight in five years.

To understand how and why that is so, one first needs to recognize a dirty little secret about Medicaid. Namely, the states that have expanded Medicaid eligibility to more of their populations have limited the cost of those expansions by slashing Medicaid physician payment rates. Of course, physicians in those states risk going broke if they see too many patients whose Medicaid reimbursement is less than the doctor’s costs, so most of them refuse to participate in Medicaid. The result is that those states have both the largest Medicaid rolls (as a percentage of the state’s total population) and the worst access to care and quality of care for Medicaid patients.

Put another way, some states like New York have already implemented in their Medicaid programs the classic leftist health care con job of offering more people government health insurance coverage that not only doesn’t increase, but actually decreases, their access to medical care.

The most recent available data from 2006 show that over one-quarter of New York’s population (27 percent), or more than 5.1 million individuals, are covered by Medicaid, but New York’s Medicaid program pays primary care doctors only 36 percent of the rates that they get for providing the same services to Medicare patients.

So, when section 1202 takes effect in 2013, primary care physicians in New York will suddenly get paid nearly three times as much as they previously did for treating Medicaid patients. That will certainly be good for doctors. It will also be good news for Medicaid patients, as it will make it more likely for them to actually get medical care.

But then what happens twenty-four months later on January 1, 2015 when the federal funding to cover the extra cost of that pay hike, goes away? Will New York physicians simply accept a return to the status quo ante with an effective 64 percent cut in their Medicaid rates, and will Medicaid enrollees simply accept the reduced access to care that such a physician payment cut will entail? Not likely.

New York’s normal federal match rate for Medicaid spending is 50 percent. So if New York lawmakers are to keep in place after 2014 the physician payment increase imposed by section 1202, they are going to have to get their own — already overtaxed — state taxpayers to cough up half the extra cost.

Of course, New York could try to get the Federal government to keep bailing it out, but how likely is it that U.S. Senators from states that got little or nothing in extra payments under section 1202 will vote to approve the “Empire State Bailout” of 2014?

Six states already pay their primary care physicians Medicaid rates that are equal to — or in the case of Alaska, Wyoming, Idaho and North Dakota — greater than Medicare rates. Another nine states pay Medicaid rates that are between 90 and 98 percent of Medicare rates, and a further 10 states pay Medicaid rates that are between 80 and 89 percent of Medicare rates. So, collectively exactly half of the states — including some of the poorest ones such as Mississippi, Louisiana and New Mexico — will get little or no benefit from section 1202. Why would their Senators be willing to keep bailing out New York at the expense of their own constituents?

The same holds true for some other states that will also be tripped up by section 1202, most notably, California. According to the same data, 29 percent of California’s population (over 10.5 million individuals) are in Medicaid, California’s Medicaid program pays its primary care doctors 47 percent of Medicare rates, and the state has a normal federal match rate for Medicaid spending of 50 percent. So, California primary care physicians will see their Medicaid payment rates more than double for two years, but then what happens?

Other states that will face the same problem, though to varying and generally somewhat lesser degrees than New York and California, are New Jersey, Rhode Island, Florida, Minnesota, Michigan, and Illinois. All of those states pay their primary care physicians Medicaid rates that are less than 60 percent of Medicare rates and all have federal Medicaid matching rates of between 50 and 58 percent.

If Speaker Pelosi gets her way reporters covering those states’ governments, particularly ones in Albany and Sacramento, should pencil in on their 2014 calendars a note to “cover state doc-fix battle.”

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Edmund F. Haislmaier is an expert in health care policy and markets at The Heritage Foundation -- and is frequently asked to assist federal and state lawmakers in designing and drafting health reform proposals and legislation.

The Statue of Liberty, was appropriately “NOT” named The Statue of Dependency, she stands on Ellis Island as symbol of individual freedom and liberty. Underline "individual", concept designer Frenchman Bartholdi a master sculpture and defender of The French as a Major in the Franco-Prussian War. He is likely rolling over in his grave as a mockery is made of his life's work.

The Declaration of Independence, what was that all about, while the document did officially separate the Original Thirteen Colonies form the British Royal Crown,

This timeless instrument of freedom separated U.S. Gov. from authority over the populous citizens with expressed rights of the individual states and individual citizens. And in doing so “DID” severely limit the Federal Government's power and authority.

I do think the "DEVIL IS IN THE DETAILS" and appreciate the research; I truly think we miss the larger debate of the role of government.

As jobs go overseas and tax based revenues dwindle much has been lost and the debate on details is skewed because C.B.O. and research groups can only calculate what info and projections they have been given publically.

World and U.S. and States recoveries have been painted as a much more "Rosy Picture" than documented statistics suggest.

The cost of major entitlement programs in the past as a matter fact and history, been shown to always exceed projected pubic debt liability and legality also fall significantly short of projected tax revenues in the treasury to keep these programs in the black. Those whom are not students of history in detailed fashion are doomed to a snowball effect of repeating history in ignorance.

I am a great Heritage fan, member, & supporter. It would be helpful to have lists of targeted/undecided Members of Congress to contact before significant votes (action items). There should have been one today for health care reform. If Heritage's legal status precludes lists, maybe it could provide a list of websites with such lists? Even GOP.com did not have a list of MCs to call, fax, or e-mail in recent days & today.

I have been looking everywhere for an answer to this question: What exactly is promised, or perhaps threatened, literally, by pelosi/reid/obama to make a senator or congressman change a vote on an issue which that person was previously committed to? If that person is an honorable person, then I don't understand why he/she doesn't stand-up for his/her conviction, whatever the consequence .Does anyone know the answer?.

No job no income no talk. Healthcare reform or not. It will be hard at first? I have been suffering since the lost of the full time employment in March of 2004. Thanks GOD and the support from church that I am still surviving. Pretty soon, my medical bills that I still owe, will sent me to the street health care reform or not. My resources from thirty years of hard work is vanishing at the speed of light. Fast and Pray is the most challenging part of my life right now since I am NOT strong enough to find work in area where I have over ten years of work experience. What does President Obama want me to do to stay healthy? I am exercising and not gaining weight due to a bowel injury by antibiotics and surgery….I have zero income and vanishing retirement plans. What can people over 50 do to make a living?

"Pelosi’s reconciliation bill amends the Senate bill to have the federal government cover all of the extra Medicaid benefit costs for all states in the first three years (2014-2016) with the federal share then declining so that from 2020 onward the Federal government would pay 90 percent of the costs with state taxpayers covering the remaining 10 percent."

I am also somewhat confused by the entire "process' in the House. I realize that Pelosi wants to approve a bill, any bill that forces people to buy insurance and expands the governments role. But since they are changing the bill with amendments, via the fake reconciliation scheme, shouldn't technically they be sending the entire package back to the Senate to have them revote on the changes? If the members vote yes on just the changes and send that to the senate, can the Senate approve the changes via a vote(and do they need 60 or just 51) and then the entire thing is sent to Obama?

Does anyone know what rule is supposed to be followed(I realize Pelosi is trying to make up rules to fit her agenda).

And to answer Jan's question, IMO, big Pharma and the insurance companies have gotten to these members Campaign contributions.. Who knows what they have been promised by them, after all, the insurance companies stand to gain increased premiums and a host of new signups via mandatory insurance and the insurance exchanges. And the drug companies are looking at the expansion of medicaid docs who see the patient for five minutes and write a script…..

And I wouild add to my comment to Jan that not only does the insurance companies(who have been noticeably absent from this argument) stand to gain new policies, but these policies have little to no competition because nothing was changed in the interstate selling rules. Why do you think that the insurance companies suddenly announced they were going to increase premiums last month? This entire thing has been orchestrated from the White House with the CEO's of the insurance companies(remember Obama has met with them secretly and not so secretly….if that had happened during Bush's tenure, the media and Democrats would have been screaming impeachment, especially to have them announce rate increases afterwords.)

Once some of the "bigger" corporations "fail" or "struggle" with near bankruptcy, major lay-offs, etc , will Obama declare they are "too big to fail" and absorb those companies just as they have GM, et al. This plan will hit my small business VERY hard. It will hit bigger corporations even more so.

Let's take Caterpillar for example since they have been in the news reporting the HUGE price tag they will endure because of Health Care. Could not this administration announce that they can not fail? Or perhaps when Cat moves jobs overseas, what is to keep the administration from intervening and stopping the loss of "US jobs overseas?" How many such major corporations could be swallowed up using the concept of "too big to fail" after an administration has created some many new obstacles and raised the height of others?

I believe we are seeing the first domino fall in an overall plan to socialize all businesses and corporations a la the old Soviet Union, Cuba, etc.

Pray to our God that this bill will die today, and never be alive again. It cuts my SSI , raises a tax on nonearned income such as stocks bonds savings. Outrageous! I personally will do what ever I can to defeat who ever votes for this bill regardless of the state they live in. .NOT GOOD FOR AMERICA, NOT GOOD FOR AMERICA . We left Europe for a good reason Taxes, Taxes, Taxes. This is just another TAX. wE DON'T NEED IT . THERE ARE BETTER WAYS TO GET HEALTH CARE AFORDABLE AND NOT SACRIFICE OUR DOCTORS.

I have written on my blog about the unspoken debts and other meanings of this healthcare debate. When an elected official stands and tells us that he and his ilk have given us a new right, I want to scream.

To Jan, I would simply say that many times throughout history people of power have used the excuse of, "It is better for me to turn my gaze at times in order to protect the people I support from things in the future." Those who vote against their conscience will argue in the future that they had to vote yes in order to maintain their power for future votes. It is sad and ridiculous, but it is true.

Check-out my blog at http://www.goodwrites.com for more thoughts and arguments against those who think the government has the ability to GIVE YOU RIGHTS.

All small businesses in the U.S. need to Boycott Obama Care, before it goes to the Senate for approval. All the small businesses should close at least one day before they vote in the Senate on Obama Care. The whole nation needs to send a message to Washington now.

To John B. The Statue of Liberty is on Bedlows Island now known as Liberty Island in the harbor of New York, she is visable from Ellis Island. For all who do not want this, contact you attorney general of the state or commonwealth you live in ask them to join Virginia and the other 33 states/commonwealths that are filing suit as this is unconstitutional. The Constitution forbids, in clear language, a bill cannot be passed that excludes members of Congress, nor can one be passed to cover them and ignore the rest of the country. Also we cannot be FORCED to buy any commodity. Vote in 2010

Not to worry Rae Ann. You are among many that do not fully grasp the concept and mechanics of jamming through such an important piece of legislation with less than 35% support from constituents. Part of the probleme lies in the underhanded methodology members of the house have implemented to keep the public at large in the dark. Their assertions that this is and has been a totally transparent process is BUNK.

For heaven's sake, even one of their top people made a terse and condescending comment when asked about the "rules" for moving a bill through the legislature; his response: "We don't have any rules, we make it up as we go." How can we the people (remember us, you socialist morons?) keep track of what is transpiring, when they don't even have rules to play by until it suits their agenda? Apparently the liberals in control of congress actually don't think you and I need to know – just shut up, comply, and swallow the bitter pills as they are shoved in your face. Is that what we the people want?

Considering this reconciliation bill……How come they are saying that they only need 51 votes for it to pass? I thought that if it was a new bill they are required for a full vote. When it comes to the procedures of the capital I guess you would say that I’m uneducated to the facts…..I have been trying to learn and understand the constitution and how things work in the capital……Can someone please help me with trying to understand the facts?

To Jeanne Stotler you are right The Statue of Liberty is not on Elli Is., thank you.

I have never visited the great symbol of freedom to this day. I should plan a trip there before Obama changes the name.

As far as your suggestions I will take them this is definitely not over. It’s Monday morning after as I write, I always check in with Bloomberg with my coffee. Pharmaceuticals are rising on the ticker.

I can't help but wonder what all took place when Obama met with Pharma –Execs in the White House this whole deal doesn't past smell test or Constitutional muster. Thank You I will read more carefully in the future Jeanne.

to John B, I am a new yorker by birth, an American because my 12 great grandfather, Richard Warren, left England and landed in Plymouth that cold DEc. in 1620, on my grandmother's side a courageive French man left Cannes with his 12 yo son and landed on Long Island, the lad was left alone when his father went to get the rest of the family, he was never head from again, this lad,Henri Mershon, fathered 10 children his second son Andrew is my line, Andrew was an Inn Keeper in New Jersey now called Hopewell. He opened his barn to Gen. Geo. Washington's men as the gathered before that Christmas Eve, to fight in Trenton. I am proud of my ancestory and I am sure these brave people are spinning in their graves. Our country was founded on hard work and being responsible for your actions and yourself,only exception were sick and aged. People that take and never give are called leeches, they should not be incouraged, they should be "taught to fish". The passing of this bill will drive many out of medicine, thank God I am retired, no DR. is going to spend 12 yrs and thousands of $$ to make minumim wage. We are fast headed for Communism and Obama will make himself ruler for life if given a chance, I said it mos. ago. The old agage "Be careful what you wish for" should be heeded by all whothink this is great.

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